Won Weakest Among Them
Despite the waning of the “king dollar” phenomenon that prevailed last year, the currencies of three East Asian countries – South Korea, China, and Japan – have not managed to break free from their weakened positions. Notably, the Korean won appears to be weaker compared to the Japanese yen and the Chinese yuan.
According to data compiled by the Wall Street Journal (WSJ) up to the end of this month on Aug. 31, the closing exchange rates for this month until Aug. 30 have shown a 3.68 percent increase in the won-dollar rate, a 2.79 percent increase in the yen-dollar rate, and a 1.97 percent increase in the yuan-dollar rate.
During the same period, the U.S. Dollar Index (DXY), which measures the value of the U.S. dollar against six major currencies, increased by 1.27 percent. It crossed the 104 mark on Aug. 28 (local time) after Federal Reserve Chairman Jerome Powell hinted at the possibility of further interest rate hikes in his “Jackson Hole speech.” However, the dollar’s ascent was limited after the release of the August private sector employment figures on Aug. 29 and the announcement of second-quarter economic growth on Aug. 30. Both of the figures fell below market expectations and were interpreted as signals of economic slowdown.
During the same period, the exchange rate of the euro against the dollar increased by 0.69 percent, and the exchange rate of the pound against the dollar grew by 0.89 percent, in comparison to the significant rise in the won, yen, and yuan exchange rates. Regarding the yen, Goldman Sachs predicted that the dollar-yen exchange rate would rise to 155 yen within the next 6 months, driven by expectations of continued accommodative monetary policy by the Bank of Japan (BOJ). This would signify the yen’s value falling to its lowest level in 33 years since June 1990.
The yuan is facing depreciation due to the severe economic downturn in China, exacerbated by the risks in the overheated real estate market triggered by the Country Garden’s default crisis.